Rates moderate across most commercial lines

Rates are moderating and coverage stabilizing across most lines of commercial insurance, with property a notable exception, broker Alera Group Inc. said Thursday in a report.

The average rate increase in commercial property is 18.3%, and inflation and natural disasters continue to impact reinsurance costs, the report said.

Rate increases continue to be highest in catastrophe-prone areas, and conditions are likely to remain challenging through year’s end, Alera said.

“Cost drivers are increasing severity and variety of weather-related losses, hefty reinsurance rate hikes on July renewals, and rising building replacement costs,” Alera said.

The market for buyers with natural catastrophe exposures remains tight, and insurers are reserving capacity for clients investing in risk mitigation measures, the report said.

“Insurers are also limiting the capacity they’re willing to devote to umbrella and excess policies. Multiple companies are often required to achieve the full limits buyers need,” Alera said.

Global insured natural catastrophe losses reached $50 billion in the first half of this year, 54% above the 10-year average of $32 billion, Alera said. Severe convective storms were the leading driver of insured losses.

The average rate increase in the second quarter was 8.3% across all lines and all account sizes, according to the Council of Insurance Agents and Brokers Commercial Property/Casualty Market Index for Q2 2023, Alera said. There have been 23 consecutive quarters of rate increases.